On November 28, representatives from three of the SEC's divisions met with representatives from SolidX, VanEck, Cboe and Patomak to discuss a proposed rule change to list and trade the first bitcoin ETF (VanEck SolidX Bitcoin Trust). A previous meeting happened on October 9 and focused on convincing the SEC that the market is mature enough to support the ETF.
In the most recent meeting, the proponents made the argument that the underlying bitcoin market is comparable to other assets such as crude oil, silver and gold, which already have an ETF. According to the presentation, bitcoin derives its value as a “money substitute” similar to gold and silver. The spot and futures prices of bitcoin are tightly linked, which the proponents claim is evidence of a well-functioning capital market.
The presentation also makes the argument that several properties of bitcoin and the underlying ecosystem make it less susceptible to manipulation than other commodities that underlie already approved ETPs:
- no inside information relating to the supply
- manipulation of the price of bitcoin on any single venue would require manipulation of the global bitcoin price in order to be effective
- manipulation on a trading platform would require overcoming the liquidity supply of such arbitrageurs who are effectively eliminating any cross-market pricing differences
- homogeneity of bitcoin makes for a uniform worldwide market rather than regional semi-independent markets that result in non-fungibility and market fragmentation
The full presentation is uploaded on the SEC's website. The final deadline to make the decision is set for late February 2019.